Wednesday, November 12, 2014


Barnsdall Main Street Well
Sometimes federal agencies seem to parody themselves, conforming neatly with the image contained in the wild imaginations of conservative critics as out-of-touch bureaucracies issuing senseless mandates spoken in liberal shibboleths.  Such is the case with the new Environmental Assessment Template issued by the Osage Agency, which is within the Bureau of Indian Affairs ("BIA").

To understand it, you will need some background.  In 1883, the Osage Indians purchased from the Cherokee Nation the land that would become Osage County in the State of Oklahoma.  When you cross over into Osage County, you are also crossing over into the Osage Reservation.  In 1906, Congress passed the Osage Allotment Act, 34 Stat. 539, which divided the land in the Osage Reservation among the members of the Osage Tribe. The subsurface mineral estate would be owned by the Tribe, but development of the mineral estate would be overseen by the United States, and the resulting revenue would be managed and distributed by the United States as trustee for the Tribe. Oil and gas leases are entered into between the Tribe and independent producers, but must be "approved" by the Secretary of the Interior through the Superintendent of the Osage Agency.

This arrangement imposes conflicting duties on the part of the BIA.  It owes a fiduciary duty to the Osage Tribe, a sovereign nation, to preserve the value of the mineral estate and maximize revenue, but it also has a duty to comply with all statutory law and executive orders governing the operations of federal agencies.  Of course, few if any of these laws serve to further the fiduciary duty owed to the Osage Tribe.

An example is the National Environmental Protection Act (“NEPA”), enacted on January 1, 1970.  It directs all federal agencies to assess the environmental impact of proposed “major federal actions” that significantly affect the quality of the environment. Arguably, BIA approval of oil and gas leases constitutes “major federal action” that must comply with NEPA mandates. This means that at a minimum, the BIA must complete an Environmental Assessment ("EA") prior to lease approval, establishing that the approval is not anticipated to have a significant impact on the environment.

In May 1979, the Area Director for the BIA approved the Environmental Assessment for the Oil and Gas Leasing Program of the Osage Indian Tribe, Osage County, Oklahoma.  Since 1979, the BIA has approved thousands of leases and well permits, premised upon that single EA being sufficient to comply with NEPA.

A surface owner in Osage County has now challenged that practice in a lawsuit filed in the United States District Court for the Northern District of Oklahoma, the argument being that drilling practices and environmental knowledge have changed since 1979 and therefore the 1979 EA has become stale.  Furthermore, it is argued that regulations specific to the approval of Osage leases, 25 CFR § 226.2(c) , provide that “[e]ach oil and/or gas lease and activities and installations associated therewith subject to these regulations shall be assessed and evaluated for its environmental impact prior to its approval by the Superintendent.”  This suggests that an assessment of some sort must be performed prior to each lease approval.

In panicked overreaction to the filing of the lawsuit, the Osage Agency issued a notice to the oil and gas producers that henceforth, they would need to perform an EA as a prerequisite to applying for a lease or drilling permit.  (NEPA places the obligation of performing an EA on the subject federal agency, but the agency will often delegate that obligation to state agencies or private actors.)

Of course, this notice appeared to give legitimacy to the charge made in the lawsuit that there has been a failure to comply with NEPA mandates.  This emboldened the plaintiff's attorney, who has now filed a class action suit which seeks to certify a plaintiffs' class comprised of all surface owners in Osage County where oil and gas operations have occurred, and a defendants' class comprised of all unnamed lessees who have operated in Osage County.  This lawsuit is a pure money-grab, made evident by the requested remedies, which include the disgorgement of all profits made by the defendants from oil and gas operations in Osage County.

Next, the Osage Agency issued an Environmental Assessment Template to instruct the producers on what each EA should look like when applying for a lease approval, drilling permit, or perhaps any permit whatsoever.  Producers estimate it will cost between $6,000 and $10,000 to complete each EA.  More troubling are the "best management practices" ("BMP" throughout the template) for lease operations set forth in the 59-page template.  They appear to have been drafted by someone who is more attuned to special interests voiced in D.C. than to the practicalities of energy production:

  • Reduce the amount of fugitive dust and vehicle emissions by controlling road speeds and carpooling
  • Use "green" completions to recapture product that otherwise would have been vented or flared
  • Use natural gas-powered engines
  • If a "noxious weed community is found," the "services of a qualified weed control contractor would be utilized.
  • The applicant must obtain information to determine the federally protected species that could potentially occur within the vicinity of the project.  (This sometimes requires hiring a biologist to count endangered beetles.)
  • "The presence of qualified cultural resource monitors during construction activities is encouraged."
  • "Environmental justice communities are present within Osage County . . . [P]otential impacts are reduced through surveys of proposed well locations, and access road and gathering pipeline routes; mitigation measures required by the BIA; and thorough reviews and determinations by the BIA that there would be no effect to historic properties."
  • Planning transportation to reduce vehicle density.
  • Posting speed limits on roads.
  • Painting facilities a color that would blend with the environment.
  • Keep a watering truck on site and water the access roads as necessary.
  • All utility lines, including gathering pipelines, and electric and fiber optic lines, essential to oil well operations, would be installed underground.
The template also contains a 2-page section under the caption, "Greenhouse Gas Emissions and Climate Change."  This section includes a chart of "temperature anomalies in the contiguous United States, 1979-2009" from NOAA, and includes the following statement: "IPCC experts concluded that most of the observed increase in globally averaged temperature since the mid-twentieth century is very likely due to the observed increase in anthropogenic GHG concentrations."  But the section concludes with this: "Oil and gas producers in the United States are not considered large GHG emitters by the EPA, and are not the subject of any current federal proposals that would regulate GHG emissions."  In other words, "climate change" speculation has no relevance to an EA prepared in support of a lease application.  It is in the template only because it is the confession that must precede absolution in the form of a permit.  

The template, combined with the pending class action lawsuit, has resulted in a fall-off of oil production in Osage County.  Since the release of the template, there have been no new wells permitted.  Rigs are going idle and service companies are laying off workers.  The Osage Tribe is facing a substantial fall in oil revenue.

Not surprisingly, there are some angry producers in Osage County who have some tough questions for the new Osage Agency superintendent.  The toughest question might by the simplest: "Why has the BIA informed producers that they must start performing environmental assessments to comply with NEPA, if the BIA will be arguing in court that the 1979 assessment is sufficient?"

This issue pits two Democrat constituencies against one another -- environmentalists and Native Americans.  We shall see which group has the most political clout.  

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